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    Ias 02 Inventory

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    Ánh Nguyễn Thị Ngọc
    The document summarizes the key principles of IAS 2 regarding the valuation and measurement of inventory. [1] Under IAS 2, inventories must be valued at the lower of cost and net realizable value. [2] The cost of inventory includes costs of purchase such as import duties and transport, as well as costs of conversion including direct labor and production overheads based on normal capacity. [3] Net realizable value is the estimated selling price less costs to complete and sell.

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    Ias 02 Inventory

    Uploaded by

    Ánh Nguyễn Thị Ngọc
    22 views11 pages
    The document summarizes the key principles of IAS 2 regarding the valuation and measurement of inventory. [1] Under IAS 2, inventories must be valued at the lower of cost and net realizable value. [2] The cost of inventory includes costs of purchase such as import duties and transport, as well as costs of conversion including direct labor and production overheads based on normal capacity. [3] Net realizable value is the estimated selling price less costs to complete and sell.

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    The document summarizes the key principles of IAS 2 regarding the valuation and measurement of inventory. [1] Under IAS 2, inventories must be valued at the lower of cost and net realizable value. [2] The cost of inventory includes costs of purchase such as import duties and transport, as well as costs of conversion including direct labor and production overheads based on normal capacity. [3] Net realizable value is the estimated selling price less costs to complete and sell.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    22 views11 pages

    Ias 02 Inventory

    Uploaded by

    Ánh Nguyễn Thị Ngọc
    The document summarizes the key principles of IAS 2 regarding the valuation and measurement of inventory. [1] Under IAS 2, inventories must be valued at the lower of cost and net realizable value. [2] The cost of inventory includes costs of purchase such as import duties and transport, as well as costs of conversion including direct labor and production overheads based on normal capacity. [3] Net realizable value is the estimated selling price less costs to complete and sell.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 11

    IAS 2– INVENTORY

    IAS 2– Inventory
    Principles

    Inventories are valued at the lower of cost and net


    realizable value (NRV).

    www.vietsourcing.com www.vietsourcing.edu.vn
    IAS 2– Inventory
    Costs of inventory

    Cost is the cost of bringing items of inventory to their


    present location and condition (including cost of purchase
    and costs of conversion).

    www.vietsourcing.com www.vietsourcing.edu.vn
    IAS 2– Inventory

    purchase price including


    import duties, transport and
    Cost of handling costs any other
    purchase
    comprises directly attributable costs,
    less trade discounts, rebates
    and subsidies.

    www.vietsourcing.com www.vietsourcing.edu.vn
    IAS 2– Inventory

    Cost of conversion comprises:


    ü costs which are specifically attributable to units of
    production, e.g.
    ü direct labour, direct expenses and subcontracted work
    ü production overheads, which must be based on the
    normal level of activity .
    ü other overheads, if any, attributable in the particular
    circumstances of the business to bringing the product
    or service to its present location and condition.

    www.vietsourcing.com www.vietsourcing.edu.vn
    IAS 2– Inventory

    Charged as expenses:
    • abnormal waste
    • storage costs
    • administrative overheads which do not contribute to
    bringing inventories to their present location and
    condition
    • selling costs.

    www.vietsourcing.com www.vietsourcing.edu.vn
    IAS 2– Inventory

    NRV is the estimated selling price, in the ordinary


    course of business, less the estimated costs of
    completion and the estimated costs necessary to
    make the sale.

    • actual unit cost


    Valuation
    • first in, first out (FIFO)
    methods
    • weighted average cost (AVCO).

    www.vietsourcing.com www.vietsourcing.edu.vn
    IAS 2– Inventory
    Inventory valuation methods

    the FIFO method


    the AVCO method

    www.vietsourcing.com www.vietsourcing.edu.vn
    IAS 2– Inventory

    Disclosure requirements
    • accounting policy adopted, including the cost formula
    used
    • total carrying amount, classified appropriately
    • amount of inventories carried at NRV
    • amount of inventories recognised as an expense during
    the period
    • details of any circumstances that have led to the write-
    down of inventories to their NRV.

    www.vietsourcing.com www.vietsourcing.edu.vn
    IAS 2– Inventory-Q1

    High Co. manufactures component for TV


    production.
    Cost of raw materials per unit $100 but supplier
    offered 15% trade discount
    Labour costs per unit $25
    Production overheads $400,000
    Expected (normal) output 50,000 units
    Actual output 40,000 units
    What is the per unit cost of the component?

    www.vietsourcing.com www.vietsourcing.edu.vn
    IAS 2– Inventory

    Which of these costs may be included in the cost of


    inventories of raw materials and purchased
    components?
    a/Import duties
    b/Transport costs
    c/Interest
    d/Variable production overheads

    www.vietsourcing.com www.vietsourcing.edu.vn

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